Robert Rubin, former US treasury secretary, quit his role at the banking group Citigroup yesterday which was recently bailed out with $45bn (£29.6bn) of taxpayers' funds.

Rubin, who has played a key role in developing Citigroup's strategy, resigned with immediate effect as senior counsellor and will stand down from the board at this year's annual meeting.

His departure was announced amid reports that the firm could sell its stockbroking arm, Smith Barney, through a possible deal with its rival, Morgan Stanley.

CNBC said Citi and Morgan Stanley were in "deep talks" over a deal that would create Wall Street's biggest brokerage , overtaking the existing leader, Merrill Lynch.

A deal with Morgan Stanley would combine Smith Barney's 11,000 staff with Morgan Stanley's 8,000. As of November, Smith Barney had $1.3tn in clients' assets, managed from 764 branch offices.

Citigroup has, to date, defended its model of a "global, universal bank" with operations ranging from high-street deposits to fund management, stockbroking and investment banking.

Until the credit crisis gripped the financial industry last year, Citigroup was the largest bank in the world in terms of assets. But the firm has taken swingeing write-downs on its exposure to mortgages and credit-related derivatives. Doubts about its liquidity prompted the US treasury to provide an emergency injection of funds in November.

A former treasury secretary in the Clinton administration, Rubin, 70, has served in a variety of strategic and advisory roles since joining Citigroup in 1999. He has been criticised over the last year for his involvement in decisions to take on extra financial risk.

In a statement, Citi's chief executive, Vikram Pandit, said Rubin had made "invaluable contributions" to the company: "Bob has been instrumental in working with clients around the globe and forging strong relationships for our businesses."

Rubin's departure came as a congressional panel accused the Bush administration of lacking a coherent bail-out strategy. It argued that the US should look at Britain to learn how to rescue troubled banks effectively. In a highly critical report, a five-strong official body appointed to oversee the troubled asset relief program (Tarp) said the US treasury was doling out $700bn in rescue funds without sufficient accountability or transparency.